After a record year in 2012, gasoline analysts see lower gasoline prices in 2013. AAA reported the annual average price of gasoline in 2012 set a new record at $3.60 per gallon nine cents more expensive than the previous high of $3.51 in 2011. AAA is optimistic 2013 will not be a record repeater.
In 2012, the average household consumed some 1,140 gallons of gasoline for an annual average cost of $4,112. This was just slightly below the record $4,127 that an average household spent in 2011, when it consumed approximately 1,174 gallons of gasoline. AAA continues to expect that the national average price in 2013 will be less expensive than the record average in 2012, and analysts continue to predict that demand destruction is likely to persist even with a recovering economy.
Analysis from Consumer Energy Alliance finds the two year trend for gas prices is up, up 30% in fact. Pair rising prices with just 2% increase in annual income and gasoline becomes a growing burden on the family budget.
Motorists shouldn’t hold out hope for a major reduction in price unless the United States can increase its refinery capacity and take significant steps towards energy independence, says Consumer Energy Alliance Ex-VP Michael Whatley. “The biggest obstacle is policy.”
A recent CEA report notes the United States is on pace to overtake Saudi Arabia as the world’s number one producer of oil. This is a positive sign considering there is only an increase in demand globally. However a shrinking capacity in the U.S. to refine oil into gasoline as well as bottlenecks in transporting crude to refineries are keeping prices here high. Today there are 144 operating oil refineries in the United States down from 301 in 1980. (Source).
Inaction by lawmakers in Washington D.C. is also hurting prices. Congress has yet to effectively address the Administration’s restrictions to domestic resources such as opening federal lands to exploration or expanding sites in the Outer Continental Shelf for exploration. Leaders like Virginia Governor Bob McDonnell are actively lobbying Congress to rewrite the current leasing plan to include exploration off Virginia.
Down the street from the U.S. Capitol, the U.S. Environment Protection Agency has stated it has the authority to implement a low carbon fuel standard (a carbon emissions cap aimed at gasoline and diesel engines), which would more than double the already sky-high gasoline prices.
Policy and the economy are not the only factors. Natural disasters, similar to Hurricane Sandy which devastated parts of the East Coast, can have significant impact on gasoline prices, especially if a disaster forces the idling of refineries as Hurricane Isaac did in 2012.
As AAA notes:
The largest one-day change in the national average in 2012 was on August 29 when prices surged by nearly five cents per gallon the day after Hurricane Isaac made landfall on the Gulf Coast.
Policy makers in Washington + Mother nature = uncertain future for gasoline prices.